What Happens If You Die Right After You Buy Life Insurance

What Happens If You Die Right After You Buy Life Insurance?

Understanding how to claim a life insurance policy is crucial after the policyholder's death. Explore further details below.

Written by : Nitin Bhatia

Reviewed by : Gaurav Nagpal

Gaurav Nagpal

2023-10-29

1323 Views

5 minutes read

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Insurance acts as a financial cushion that presents economic stability to your loved ones if anything unfortunate happens to you. However, what happens when the owner of a life insurance policy dies as soon as they purchase the policy? What happens if you die a month after getting life insurance? Will their beneficiaries still claim the insurance? All these questions can pop up in your mind while you buy life insurance.

A life insurance provider is contractually bound to pay the stipulated mortality benefit regardless of when the policyholder dies, whether two months or twenty years after the policy gets purchased. While the purpose of life insurance is to present coverage in case of the insured person's sudden death, if the insured departs within a year or two of acquiring their insurance policy, the insurance provider will look for ways to avoid settling the claim.

This especially happens if the information on the primary insurance application is fallacious or if it seems that the policyholder might have committed suicide.

Table Of Content:

Steps to Take After the Insured’s Death

After the first payment of the life insurance policy, your time of passing doesn't matter. People sometimes say, “What happens if you die a month after getting life insurance?” You will most likely be covered. And the beneficiary will be allowed to claim your life insurance benefits. However, before making a claim, understand the provisions of the insurance company on how long a beneficiary has to claim a life insurance policy and also consider some of these steps below:

  1. Getting a Death Certificate: After the insured person's death, the beneficiary must get a certified copy of the death certificate. The location, dates, and time of death are specified in this legal document. The cause of death is also named. This helps the insurance company to verify the cause of death.

  2. Contacting the Life Insurance Company: If you know the insurance agent, contact them immediately. You can also contact the Insurance company to claim the death benefits. And if you know nothing, then the National Association of Insurance Commissioners (NAIC) has a locator service that will help you find the insurance company. The company might also try to contact you, but sometimes, it takes time to know that person is deceased.

  3. Filling out the Form for Death Claim: In the end, the company needs the beneficiary to fill out the form for a death claim. If no death claim gets filed, then there will be no benefits. Hence, to get the insurance claim, immediately fill out the specified form to receive the mortality benefits.

  4. Wait for the Insurance Company to Review a Claim: Normally, the life insurance company takes up to 30 days to review your claim. Once the review is completed and all the documents are verified, the insurer decides to settle or refuse the claim. In case your claim is refused, you can contact either the Insurance Ombudsman or the IRDAI to resolve this issue.

Did You Know?

The death claim settlement ratio of the life insurance industry was 98% in 2022-23.

Source: The Economic Times

Claim Settlement Ratio

Two Reasons Your Life Insurance Won't Payout 

Mentioned here are some reasons why life insurance won’t payout if you die right after purchasing a life insurance policy.

  1. Wrong Disclosure of Medical Records: If the policyholder dies within the contestability period (the initial period after purchasing the insurance), the insurance company holds the right to check your medical records. The insurance provider can conduct a complete examination of the individual's medical records and the other information submitted with the application. If any medical data has been excluded when applying for a policy, the insurance company has the right to refuse claims or reduce the death benefit.

  2. Suicide Clause: The suicide clause in the life insurance policy mentions that the policyholder cannot commit suicide within the contestability period. If failing to do so, the insurance company will hold every right to reject the claim of your beneficiaries.

Conclusion 

Understanding what happens when life insurance policyholder dies and the steps to undertake after that are very important to secure your family’s future. It is even more important to understand what happens if you die a month after getting life insurance. The IRDAI and most insurance companies have protocols in place to address such scenarios, ensuring that by adhering to these procedures, your loved ones can access the financial protection necessary to safeguard their future.

Glossary:

  • NAIC: The National Association of Insurance Commissioners is an American organisation that provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers.

  • IRDAI: The Insurance Regulatory and Development Authority of India is a branch under the Ministry of Finance. It is tasked with regulating the insurance industries in India.

  • Insurance Ombudsman: They serve as a dedicated authority for resolving insurance-related problems of insurance customers.

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FAQs

Beneficiaries must inform the insurance company of the policyholder’s death through a death claim.

To file a claim on a life insurance policy, a nominee must notify the insurance company’s claims department of the policyholder’s demise.

To file a death claim, you need a claim form given by the insurance company, a death certificate, ID proof of the beneficiary, and the original insurance policy papers. In some rare cases, you may also need medical reports, postmortem reports, and employer certificates.

Insurance payouts are guaranteed to be provided to beneficiaries within 30 days of filing a death claim.

If a policyholder passes away during the contestability period, the company investigates the beneficiaries’ claim and the policyholder’s passing. It can also deny payment if it finds any misrepresentation or wrongdoing.

There are no taxes on the life insurance payout when a policyholder passes away, which provides immense financial relief to the family of the deceased.

A life insurance claim can be denied for multiple reasons, like non-disclosure of any illnesses or providing incorrect information to the insurance company.